New distillery is last call for Prohibition

Changes in state law have made it easier for distilleries to open in New York, and a local group is giving it a try.

Lockhouse Distillery will be the first distillery to operate in the city in 83 years, when the last ones were closed during Prohibition.

The craft distiller, which raised more than $14,000 this summer through a crowd-funding initiative, is set to open Saturday. Its vodka, distilled from grapes grown in Lockport, will sell for $35 a bottle.

“It really dovetails with the farm-to-fork movement,” said Thomas Jablonski, one of Lockhouse Distillery’s four partners. “People are willing to pay for quality. People are willing to pay for local, non-mass-produced products.”

The distillery, operating from a small space in the Great Arrow Building at 255 Great Arrow Ave., is starting off small, making three to four 12-bottle cases of its vodka each day, which it markets as a premium product.

“We’re a micro distillery. It’s not like we’re producing hundreds of cases,” Jablonski said Tuesday.

Lockhouse’s four partners are hoping vodka is just the start. They already have started brewing whiskey that will need to age for at least a year before it’s ready to be sold. Eventually, they hope to branch out to making gin and bitters products, said Jablonski, who oversees the business side of the new distillery.

Lockhouse opens its doors to the public at noon Saturday. Its vodka won’t be available in liquor stores or restaurants until the beginning of next year, while Lockhouse waits to clear the final regulatory hurdle to allow wholesale distribution.

“We’re starting by selling directly,” said Jablonski, whose day job is as the chief financial officer at Escape Wire Solutions, a Buffalo technology services firm.

While Lockhouse will be the only operating distillery in the Buffalo Niagara region, craft distillers have been a small, but fast-growing segment of the spirits marketplace over the past decade. New York was a late entrant to the craft market because state regulations on distilling made it prohibitively expensive to produce spirits in the state.

That started to change in 2002, when the state’s laws were loosened a bit, and changed rapidly in 2007, when the state’s Farm Distillery Law was changed to lower the financial costs that beginning distillers faced, as long as they bought at least half of their raw materials from New York sources.

Industry officials now estimate there are more than 30 craft distilleries operating throughout the state, with a heavy concentration in the New York City area.

Despite its late start, New York now has more craft distilleries than any state except California, although the volume of spirits produced at New York’s distilleries totals fewer than 50,000 cases a year, in part because of their relatively recent launches and limitations stemming from the Farm Distillery Law, according to the American Distilling Institute, an industry trade group.

Nationally, craft distillers are a tiny, but fast-growing part of the spirits market. Their number has roughly doubled since the beginning of 2010, with about 350 licensed craft distilleries in operation. That could reach 1,000 by the end of 2015, according to the American Craft Distillers Association.

“It’s just growing by leaps and bounds,” said Pennfield Jensen, the craft distillers association’s executive director.

Most craft brewers, including Lockhouse, try to carve out a niche in the premium end of the market, touting their local connections and unique brand. “It’s very hard for the big guys to dislodge a craft brewer once they’ve established themselves in the marketplace,” Jensen said.

The amount of spirits produced by craft distillers also has spiked, jumping from 700,000 cases in 2010 to 1.2 million last year, according to the distilling institute. Yet despite 25 percent sales growth last year, craft distillers still captured less than half of 1 percent of overall spirits sales in the United States during 2012, far less than the 7 percent market share that craft beer and wine makers control in their market.

Jablonski said he and his Lockhouse Distillery partners have been working toward Saturday’s opening for more than two years. The idea originated with Niko Georgiadis, the venture’s president, who lived for a time in Woodstock, near the home of the state’s first craft brewery, Tuthilltown Spirits, which opened in 2004.

“He saw that people were lining up out the door,” Jablonski said.

When Georgiadis returned to Buffalo, he persuaded Jablonski and the other two partners, Chad Vosseller and Jon Mirro, to join him in a venture to bring a distillery to Buffalo. Each of the partners has dabbled in home brewing and wine-making, Jablonski said, and they visited other craft distillers to learn more.

“We all come in at night and on weekends,” he said.

It takes about three weeks to produce a batch of vodka, Jablonski said. The process begins by fermenting grapes – in Lockhouse’s case, the grapes come from Freedom Run Winery in Lockport. The fermented mixture then is distilled several times to separate the alcohol, which then is filtered and left to sit for several days. That highly concentrated liquid, which at that point is more than 90 percent alcohol, then is diluted to bring the vodka to its desired proof.

“It’s not an easy process, but the process of distilling starts along the lines of brewing or wine-making,” he said.

The venture also had to overcome time-consuming regulatory hurdles. The distillery needed a zoning variance from the City of Buffalo, where the zoning code wasn’t designed to cover distilling operations. Then there was the long process of getting a license to distill spirits, both from the federal and state governments, without which the partners couldn’t even legally practice their vodka-making recipe to fine-tune it.

Those approvals came last winter, but the partners then needed to clear another hurdle and win state and federal approval for their brewing label, which came just weeks ago, allowing the distillery to open just in time for the holidays.

With no money coming in during the lengthy permit and licensing process, the partners successfully turned to a relatively new way of raising money, called crowd-sourcing. Their campaign through the Kickstarter website raised more than $14,000, which was used to purchase the 10-gallon barrels Lockhouse needs to store – and age – the whiskey it is now starting to distill.

“This has been a long two years of spending money with no revenue,” he said. “It was fairly shocking. We were humbled by the outpouring of support we had.”